The Case for Microcontracts for Internet Connectivity

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Abstract

This paper introduces microcontracts, which are contracts
for "slices" of the Internet connectivity along dimensions
such as time, destination, volume, and application type.
Microcontracts are motivated by the observation that Internet
service providers carry traffic for different classes
of customers that use the ISP's resources in a variety of different ways and, hence, impose different costs on the ISPs. For example, customers have little incentive to move less important traffic from a peak time interval unless their
contract reflects the ISP's costs in that time interval. To address
this inefficiency, microcontracts divide connectivity
into fine-grained units so that prices more directly reflect
the costs that the ISP bears for delivering the connectivity
at that time. We explore the feasibility of applying
microcontracts in realistic Internet service provider settings
by characterizing the traffic patterns from a transit network along two specific dimensions: time-of-day and
distance travelled. We argue that microcontracts are both feasible and advantageous to both buyers and sellers of Internet connectivity. We develop a model to help ISPs derive customer demand functions from observed traffic
patterns; using this model, we show that making contracts
for Internet connectivity more fine-grained can improve
the aggregate gain of an ISP and its customers.